Supreme Court: No Inducement Based on Divided (Direct) Infringement

On June 2, 2014, in a unanimous decision, the Supreme Court of the United States in Limelight Networks, Inc. v. Akamai Technologies, Inc. reversed a decision from the U.S. Court of Appeals for the Federal Circuit, which had held that induced infringement could be predicated on direct infringement where the claim steps were not performed by a single party. The Supreme Court’s opinion focused on the idea that the Federal Circuit’s rule would allow for liability for infringement under § 271(b), even though there was technically no infringement under § 271(a). The court concluded that, under established principles of law, there could be no liability for indirect infringement without any actual direct infringement by a single party.

Background of the Case

Akamai is the exclusive licensee of an MIT patent that claims a method of delivering electronic data using a content delivery network (CDN). Proprietors of websites contract with Akamai to deliver the content of their websites to individual users of the internet. The patent provides that certain components of a provider’s website (e.g., large files, such as video or music files) can be designated, or tagged, to be stored on servers and accessed by internet users, which allows for increased speed of access to the content. Limelight also operates a CDN and carries out several of the claimed steps, but does not tag the components to be stored on its servers. Rather, Limelight requires its customers to perform their own tagging.

Akamai successfully sued Limelight for patent infringement and was awarded $40 million in damages. Limelight filed a JMOL motion, which was denied. Thereafter, and before final judgment had entered, the Federal Circuit issued its opinion in Muniauction, Inc. v. Thomson Corp. (IP Update, Vol. 11, No. 7), holding that the defendant could not be held liable for direct infringement because it did not perform all of the claim steps and did not exercise control or direction over the customers that performed the remaining steps. In light of that decision, Limelight moved for reconsideration of its JMOL. The district court granted the motion, holding that Limelight could not be liable for direct infringement because it did not perform the tagging step, nor did it exercise control or direction over its customers. A panel at the Federal Circuit affirmed that decision. (IP Update, Vol. 14, No. 1.)

Subsequently, the Federal Circuit granted en banc review and reversed the panel decision. (IP Update, Vol. 15, No. 9.) Sitting en banc, the Federal Circuit held that Limelight could have been liable for induced infringement under § 271(b) where it carried out some of the claim steps, then encouraged others to perform the remaining steps—even if there was no agency relationship. Ultimately, the Federal Circuit held that, while there must be direct infringement to support a claim of induced infringement, direct infringement need not be performed by a single party. Rather, the direct infringement could be divided among multiple parties, as long as each of the claim steps was ultimately performed. The Supreme Court granted certiorari to address this issue. (IP Update, Vol. 17, No. 1.)

The Supreme Court’s Decision

Justice Alito began his analysis by repeating the uncontroversial rule that liability for induced infringement can arise only if there is some underlying direct infringement. The Supreme Court then observed that, in this case, the Federal Circuit had found a party liable for infringement under § 271(b), even though no single party had technically infringed under § 271(a) (i.e., one party had not performed all of the claim steps). Accordingly, the Supreme Court expressed concern that a party could be held liable for induced infringement, even though the underlying conduct did not actually constitute infringement. The court then reasoned that the Federal Circuit’s opinion created a different standard for induced infringement and direct infringement, stating, “[t]he decision below would require the courts to develop two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement.”

The Supreme Court observed that the language of § 271 does not support a reading that induced infringement could be found without an actual finding of direct infringement under § 271(a). To support its position, the court noted that § 271(f)(1) permits a finding of infringement where components are combined in a manner that “would infringe the patent if such combination occurred within the United States.” In other words, § 271(f)(1) allows for infringement liability even where there is no technical finding of infringement. Thus, when Congress intends to provide for liability for induced infringement where direct infringement has not technically occurred, “it knows precisely how to do so.” Congress did not do so, however, in § 271(b).

Ultimately, the Supreme Court reasoned that there can be no liability for induced infringement where an act of direct infringement under § 271(f) never occurred. The court explained that it has “already rejected the notion that conduct which would be infringing in altered circumstances can form the basis” for indirect infringement. For example, in Deepsouth Packing Co. v. Laitram Corp., the Supreme Court held that, because the machines at issue had not been assembled in the United States, and direct infringement under § 271(a) had consequently not occurred, there could be no liability for contributory infringement. Likewise, Limelight could not be liable for inducing infringement that never came to pass because “performance of all the claimed steps cannot be attributed to a single person, so direct infringement never occurred.” Assuming Muniauction was decided correctly (a proposition Justice Alito said is not decided here), the Supreme Court concluded that there could be no direct infringement unless a single actor can be held responsible for the performance of all steps of the patent.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

- hide

Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.